TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Good evening and welcome
to a special edition of NIGHTLY BUSINESS REPORT.
Well, believe it or not, the first quarter of the year is just about in the
books and this time around the first quarter was unlike any one we`ve
really ever seen.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Absolutely. Investors were
whip-sawed and had nerves frayed by big plunges and sharp snapbacks.
So, tonight, with one quarter just about in the rear-view mirror, we`re
going to look ahead to what we might expect as the second quarter rolls in
and how your money might be impacted.
MATHISEN: And we will begin tonight with stocks.
2016 started in the worst way possible with the market plunging. Sparking
fears of a recession and dredging up feelings eerily similar to those of
the financial crisis less than a decade ago. Then a funny thing happened
on the way down, stocks reversed and all started to seem right with the
world. What`s next?
Dom Chu takes a quick look.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: So after what started
off as one of the worst starts to a year for the stock market in history,
we`re right back to around flat for 2016, give or take a few points here
and there. Bulls and bears are feeling pretty good about their respective
After dropping 11 percent, the trend of bounce-backs has continued for the
large cap S&P 500 index. However, the parts of the market that are leading
the way higher leave a lot to be desired. The biggest gains have come from
high dividend-paying sectors like telecom stocks and utilities, the sectors
that investors flock to when they`re worried about the economy.
But some are optimistic about the market assuming some big negative factors
BOB DOLL, NUVEEN ASSET MANAGEMENT: Remember, the biggest negative last
year, there were two. Declining oil and the rise in the dollar, and both
those things at least for now have reversed themselves. If we can get some
of that we`ll have modest earnings improvement for the full year and that
is what is necessary for stocks to do OK.
CHU: And that`s not it. After all, the stock market story is a global one
and the bigger picture or macro concerns will be front and center for the
rest of the year as well.
MOHAMED EL-ERIAN, ALLIANZ CHIEF ECON. ADVISER: I think there`s going to be
two big factors that will influence the rest of this year`s trade. One is
the health of the global economy. In particular, is China able to soft
land and is Europe able to continue to grow at 1 percent to 1.5 percent?
The second element has to do with central banks. Particularly, central
banks in Europe, in Japan, in China, still able and willing to repress
financial volatility, not because they love markets but because that`s the
only way they can promote economic growth.
CHU: The market has given investors a chance to re-evaluate things. 2016
losses are now gone, at least when it comes to some of the major indices.
Now the question is, what will they do after hitting that reset button?
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
HERERA: Doug Gordon joins us to tell us what he`s expecting from the
financial markets next quarter. And what it might mean for your money. He
is senior portfolio manager at Russell Investments.
Nice to have you here, Doug, welcome.
Are you —
DOUG GORDON, RUSSELL INVESTMENTS: Great to join you, thank you.
HERERA: Are you still looking overall for 2016 for low single-digit
GORDON: That`s right, I think that we`re looking forward after the
volatile start to the year that we`ll still see something in that low to
single, med single digit returns from the equity part of the portfolio
going forward. There`s still a lot of really open questions, both tied to
diverging monetary policy as we see not only what happens but how effective
monetary policy responses prove to be.
Also, we have to get out of the woods a bit with respect to the impact of
that slower, bumpy start in earnings as well.
MATHISEN: Let`s look at two issues that certainly are going to be in the
news for the rest of this year. One is the threat of terror, particularly
how it might affect the European economies. And the other is the U.S.
How do you see those two things affecting share prices?
GORDON: Yes, Tyler, it`s interesting question, one that we normally don`t
have to think about. Kind of these outside factors that influence markets
very materially, potentially.
Obviously, the threat with ret to what we`ve seen thus far in Europe as
well as around the world. It`s a concern that`s going to go forward.
There certainly will be elevated responses. But again, we have to see how
effective those are. It`s one of those prove the negatives. When we don`t
know what the terror event could have been and it was thwarted, we don`t
see the impact so we can`t measure it.
When bad things happen like we unfortunately and tragically saw in Brussels
this week, that obviously brings to light what the potential impact can be.
Domestically here in the United States, the presidential election puts
another wrinkle into capital markets and markets going forward in 2016. I
think one thing we do know amid a lot that we don`t on that election is if
we do assume the two potential candidates and a potential Trump v. Clinton
election is that both of them will probably have a bit of trouble getting
policy through Congress that will likely, at least on the House side, stay
in line with the Republicans. And that might give a little bit more runway
in terms of time for response to any regulatory or policy changes.
HERERA: The other thing that your team is watching is Fed tightening. And
now the overarching theme on the street is that they will not raise rates
as often as originally said they would. But they`re still, even if they do
raise rates once or maybe twice through the rest of the year, they`re still
going counter to their central bank counterparts around the globe.
GORDON: Yes, that`s exactly right, that divergent monetary policy is going
to be interesting, both with respect to what the dollar does relative to
other developed currencies and then as well with respect to how the market
I think what we need to watch domestically will be that bright spot we`ve
had in the U.S. economy thus far, which has been the labor market. We
still see relatively robust payroll gains somewhere in the range of
averaging 160,000 for a 12-month perspective. I think earnings, again, as
I mentioned before, where we`re going to have to look and see if that
stumble in the first part of the year ripples into. We`ve had good numbers
on EPS side but expectations have pulled back, it will than earnings growth
number that will concern us.
Also, as I mentioned before, it`s efficacy of these policies too. We`ve
had the ECB put very accommodating policies forward, we need to see the
uptake of the targeted LRTO program and then how that ripples into credit
and lending growth in the eurozone.
MATHISEN: Very quick answer, in the equity markets, do you like America,
Europe, Asia, Japan, which? Very quick.
GORDON: Yes, outside the U.S., developed markets look a little better to
us right from a fully hedged perspective, and that`s in part because we
have that uncertainty that Sue mentioned around monetary policy in the
United States and that pace.
HERERA: All right, Doug. Thank you so much. Good to see you again.
GORDON: My pleasure.
HERERA: Doug Gordon with Russell Investments.
It was the same issue for oil as for stocks in the first quarter. The
first part we hovered in the 20s, and then things changed. Jackie
DeAngelis has more on the reversal in oil.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A bumpy quarter
for crude oil prices. We saw crude go down to that $26 level for the
second time before it rebounded back to $40. The dip attributable to the
global supply glut. The bounce back due to rumors in the market that a
production freeze could help stabilize the market, and hopes that the
summer driving season will start to boost demand.
But even if global producers meet in Qatar on April 17th, can a consensus
be reached? And would an agreement to freeze production at current levels
be enough to support oil prices?
JEFF GROSSMAN, BRG BROKERAGE PRES.: I would think these — there`s a
freeze now, that should be enough. Now, granted that means that the demand
must increase here, which is something I am expecting in this driving
season that`s coming up.
DEANGELIS: Freeze or no freeze, the fear at the moment is that producers
will feel comfortable pumping more in a higher-priced environment only to
drive the market down again. And if history is an indicator, last year
prices fell in June when stockpiles were little diminished. Summer driving
demand wasn`t enough to ball license supply and demand overall.
And consumers are feeling the recent spike at the pump. AAA says the
national average is hovering around $2 a gallon, up more than a quarter
from a month ago.
GROSSMAN: I think the gas prices could rise a bit over this driving
season. But I don`t think it`s going to be anything that`s going to
discourage motorists from using more gas, driving a little more. This is
still a big improvement over the last couple of years as far as their
So, I would say this is a positive gas season and it will be extra
consumption from previous years.
DEANGELIS: But investors and analysts, they are remaining cautious. They
say the run-up in crude oil prices more than 20 percent in the last month
alone leaves little room to run.
MATHISEN: And Jackie joins us now to talk a little bit more about what we
might expect from here. Jackie, I don`t know 40 is the new 20 or 20 is the
new 60 or black is the new red, I don`t know. But I do know that there`s a
meeting in mid-April as you mentioned in the piece. Who`s going to be
there? What are they aiming to accomplish?
DEANGELIS: Well, that`s an excellent question, Tyler. And this is a
producer meeting, not just of OPEC members, it`s global producers. Very
hard to coordinate an effort for this and actually get a date on the table.
But the problem is not everybody is coming to the table. So, how do you
implement a freeze when all of the parties aren`t necessarily coming to
discuss? You have certain OPEC members like Libya that aren`t coming. I
haven`t heard anything about the U.S. coming to the table to talk about
production cuts either.
Russia is one of the non-OPEC producers that may be there. Obviously
they`re more interested in implementing a freeze at this point. But unless
you get all the parties together, and even if you do, consensus is so hard
HERERA: That begs the question, can we see oil back at $50 or $60 a barrel
by the end of the year, as some strategists have gone on a limb and are
DEANGELIS: Yes, some of the investment banks, some of the analysts out
there, they are holding firm to those forecasts. They think $50 or $60 is
possible. Then I have others on the other side of the table that are
saying, no, actually from here, this is a little bit maybe of a head fake
run-up, we probably are going back into the $20s again and there`s a
possibility of that before things get better.
So, I think you`ve got to settle in for a bumpy ride this year. I think
$50 to $60, very optimistic.
MATHISEN: Gasoline has been going up just a little bit where I buy it in
suburban New Jersey. What are we looking for over the next few months and
then into the fall?
DEANGELIS: You know, it`s difficult to say with gasoline exactly as well.
But I can tell you this, the national average according to AAA hovering
just around $2 as we`re heading into the summer driving season. So, you
are going to see a little bump from here as demand starts to hit the road,
as we get into the warmer months.
But that demand usually peaks in July, just around July 4th. Seasonally in
the bad years, the average around then has been about $3, if not sometimes
a little bit over that. I do not think you`re going to see that this year.
So, as Jeff said in the piece, it`s definitely going to be a little bit
easier on your wallet. But it`s not going to be as great as it`s been.
MATHISEN: All right. Thanks very much, Jackie DeAngelis, reporting.
But the Federal Reserve did not raise interest rates in its two meetings
during the first quarter but there is belief that it`s April or June, those
meetings could be in place. Steven Friedman, senior investment strategist
with BNP Paribas.
Steven, welcome. Good to have you with us.
You know, I think a lot of people thought that based on the meetings in
March that — well, there were probably only going to be two hikes,
probably going to be June, probably going to be December, after the
election. But now, there is some talk that maybe April is on the table.
What do you think?
STEVE FRIEDMAN, BNP PARIBAS SR. INVESTMENT STRATEGIST: Well, it`s very
good question. There has been a lot of Fed presence come out in recent
days and make the point April is a live meeting.
In theory, I agree but I think the issue is the fed has signaled they`re
considered about global risks. It`s hard to imagine in six weeks, they`ll
have that much more confidence in the global outlook that they will proceed
with raising rates.
HERERA: We`ve seen the terrorism incident recently. Does that play into
the Fed being worried about the global situation? Because we have seen
economic growth after terrorist incidents decline.
FRIEDMAN: That`s a possibility. I think it`s just one of the risks that
they consider. I think largely, though, what they`ve been focusing on is
the fact that a lot of the indicators point to a slowing in global growth
momentum. We`ve seen it in a lot of surveys and business activity. We see
it in the hard data. They`re just concerned that that will eventually have
an impact on the U.S.
And there is some concern in the U.S. data as well that`s pointing to
slowing growth ahead.
MATHISEN: Steven, it is relatively rare that you have a divergence of
central banks with many central banks cutting and seemingly ours on the
verge of raising interest rates. Is that a concern to you or not?
FRIEDMAN: Well, I think it is a challenge in that veer very aware of it.
I think that`s why we`re seeing them signal a likely shallower path for
interest rates. I think they`re quite quarter if they were to forge ahead
with a steady diet of rate increases as they have projected in December
that would likely lead to a much stronger dollar which would only make it
more difficult for them to meet their growth and inflation objectives.
HERERA: Well, speaking of inflation, there`s not much inflation out there.
I mean, how did they finesse, if you will, the target that they`ve put out
there that they hope to achieve on inflation? That we`re not even anywhere
FRIEDMAN: I think this points to why they feel they can go very, very
slowly. We`re actually seeing their messaging on inflation change a little
bit. What we`ve over seen the last month or two is greater emphasis in
their communications on the fact that they`re willing to tolerate inflation
above 2 percent.
I think earlier, there was a perception in markets that the 2 percent
objective was actually more of a ceiling. They`re trying to push back on
that and attempt to put some support underneath inflation expectations.
MATHISEN: Talk to me for a moment about two things that seem to concern
some commentators. One is the size of the balance sheets that both the
U.S. and now increasingly the ECB have, and whether that poses a long-term
risk of some or any sort to economic growth. And the second one is whether
the central banks are running out of tools to influence economies.
FRIEDMAN: Two very good questions. I think they both feed into this
narrative that central banks are essentially out of bullets.
On the balance sheet side, it`s not something I`m particularly concerned
about. One could argue that eventually the size of the balance sheet, it
could lead to losses for central banks. That is more of a political issue.
Central banks can operate with negative capital, they have in the past.
But it can be an issue if it becomes an issue for politicians and impede
central bank independence.
So, in that sense, there might be some limit to quantitative easing.
That`s the main concern I would have for balance sheet growth.
Now, on this issue of central banks running short on tools, this has been a
very strong narrative in markets the last month or two. I think it`s been
one of the reasons why we saw that deterioration in January and February.
It`s not a narrative that I`ve put a lot of faith in. I think for central
banks, they might appreciate that their tools may have some declining
benefits. But if those are the tools they have, I would expect them to
respond to that with even more forceful policy.
MATHISEN: Steven, thank you very much. Steven Friedman with BNP Paribas.
HERERA: As we draw closer to this summer`s political conventions, the race
for the White House is intensifying. And the primaries that take place in
the second quarter will go a long way in determining the candidates for
John Harwood joins us from Washington tonight.
John, welcome. As always, are both nomination races basically over? Or
are they still in play?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Not quite. The
Democratic race is more over than the Republican race. Hillary Clinton`s
got a substantial lead over Bernie Sanders — very difficult under
Democratic rules for sanders to catch up. He`s got to start winning not
knowledge big states but he`s got to win them by big margins. That`s very
difficult to do. No sign he`s going to be able to do that.
On the Republican side, Donald Trump has got a lead. But it`s still
unclear how certain it is that he can get the 1,237 delegates he needs to
be nominated on the first ballot. Stop trump forces are rallying around
Ted Cruz. John Kasich`s been fading a bit although he hopes when the race
moves back East to have prospect to pick up victories. Ted Cruz is looking
to Wisconsin as a place to slow down Donald Trump.
But Donald Trump remains in the driver`s seat. Somebody`s got to knock him
off. It hasn`t happened in the recent contests.
MATHISEN: You know, if both parties are becoming used to the idea of a
Donald Trump candidacy in the general election, how do they assess his
prospects to win, especially against Hillary Clinton?
HARWOOD: Well, a couple of things about that. First of all, most of the
polling now suggests that Hillary Clinton has an advantage over Trump in
the general election. He`s been a very divisive candidate. He has
repelled nonwhite voters. That`s an important part of the Democratic
So, if you had to make a judgment, you`d say Hillary Clinton is a strong
favorite. But even within the Clinton campaign, a bit of wariness about
Trump, a feeling that he`s more of a wild card than they`ve expected. He`s
broken all the rules so far. If he can increase the Republican share of
the white vote by a small but significant margin, without having any other
effects in other parts of the electorate, he could win the race by flipping
some states that President Obama won in 2012. It`s an uphill fight for him
but not impossible.
HERERA: Fascinating stuff. John, thank you so much. John Harwood in
MATHISEN: Up next, what`s in store for the upcoming spring travel season?
And a check on how the spring selling season is unfolding for houses.
MATHISEN: Spring officially arrived less than a week ago but the spring
selling season for housing has been under way for a while now.
Diane Olick joins us with a look at how things have been shaping up.
So, Diana, always good to see you.
We got mixed some signals from housing recently. Existing home sales fell
sharply. But newly built home sales are rising. So, what`s going on here?
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, it really
has to do with supply. There`s a very tight supply of existing homes for
sale which is pushing prices higher and actually slowing down the sales,
because there aren`t that many homes for sale. New homes, there`s a lot
more supply. But again, you`re paying a price premium for new home sales.
New home sales are still running below historical averages. They`re just
doing a little bit better. The question going forward is, will the big
builders benefit over the fact that there are so few existing homes for
MATHISEN: Let`s talk about the price rise that you just mentioned. They
are rising but is that straining affordability, both for first-time buyers
and for people who would like to trade up?
OLICK: Absolutely on both counts. It`s straining affordability for the
first-time buyer who is still being sidelined. Just 30 percent of buyers
in February were first-timers. That number should be around — the share
should be around 40 percent.
We`re also seeing people afraid to move up, afraid they`re not going to be
able to afford that home so they`re not listing their home. And remember,
for sellers, it`s just — it`s not a limit. It`s not that the sky is the
limit. They`re going to have to look at what the comps are and be smart
about how they`re selling.
HERERA: OK. So, that`s one tip if I`m going to sell my house and list it
this month. What are some other things that the sellers should consider?
OLICK: Well, one thing, list your house on Thursday. I`m not kidding.
OLICK: People say that on Thursday, yes, you`re going to see most of the
potential buyers trolling the Internet, looking for homes that just came
on, they`re going to be mapping out their open house touring for the
weekend. So Thursday is the perfect day to list your home. Don`t list
over the weekend because people won`t see it.
HERERA: Fascinating. Staging is a big thing now.
OLICK: Yes. Staging is a big thing right now. You absolutely want to
stage your home. And more and more professionals are doing it.
And interestingly, a lot of real estate agents are starting to pay for the
staging themselves, saying that it is worth it in the price that they`re
going to get for that home. So, even if you think your house is absolutely
gorgeous and perfect, you want to stage it. Don`t just clean it up. Make
sure the rooms look clean, fresh, and impersonal. Someone lives there but
not necessarily you live there. Because the buyer wants to be able to
picture themselves there.
Again, that last one is the sky is not the limit. Buyers are not stupid.
They know what the homes are worth.
HERERA: That`s right. I wish somebody would come stage my house.
MATHISEN: And buyers ultimately set the price, not the seller.
HERERA: That`s exactly right.
Thanks, Diana, as always. Diana Olick.
MATHISEN: Well, this Easter weekend marks the unofficial start of the
spring travel season. While security will be top of mind following this
week`s attacks in Belgium, people are still making plans for getaways. The
traditional destinations will get the usual throngs of visitors.
But this year, some places off the beaten path are getting attention.
Phil LeBeau has a look.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: As winter winds down,
spring break is heating up, especially in the Caribbean where those looking
to get away are finding their way to less popular spots.
JEANENNE TORNATORE, ORBITZ.COM SENIOR EDITOR: A lot of people now are
looking for alternatives that may be a little more laid back, a little more
relaxing. Places like Playa del Carmen, Riviera Maya, where they may not
pay as much and have a little different feel.
LEBEAU: Overall, Orbitz says airfares this the spring are down roughly 15
percent compared to a year ago, partially because of the drop in fuel costs
and because more airlines are adding routes to the Caribbean, and that`s
pushing fares lower. That`s the good news.
The bad news? Hotel rates are edging higher, largely because of greater
LOUIS ZAMERYKA, BOOKING.COM: They`ll see a slight increase overall of
about 4 percent in come edition prices. But there are markets where
there`s actually substantial savings.
LEBEAU: Europe remains a popular trip for a couple of reasons. First,
airfares have been falling. Second, the euro remains weak, which means
Americans are getting more bang for their buck at hotels, restaurants, and
TORNATORE: We`re seeing that the strength of the dollar abroad is really
attracting people to upgrade their spring break destinations to go places
that are further away and then have typically have been more expensive like
Paris, Dublin, even Panama City, Panama, where we`ve seen an increase over
the last five years of 476 percent in hotel bookings.
LEBEAU: For those driving somewhere for a long weekend or spring break,
good news as well. While gas prices have moved higher the last month,
they`re still lower than where they were a year ago.
And most experts believe gas prices will stay at around $2 a gallon as we
head into the summer.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: Coming up, what to do to protect your hard-earned money in the
years leading up to your retirement.
HERERA: Market volatility, like what we`ve seen this quarter, can wear on
the nerves of the most seasoned investors. But what about those closing in
on the end of their working careers? The decade or so before calling it
Sharon Epperson has some tips for those heading into that retirement danger
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sixty-three-year-
old Michelle Jegge has been planning for retirement, putting money into
stocks for decades.
MICHELLE JEGGE, APPROACHING RETIREMENT: I`ve been a big investor. That`s
the way to grow. It`s a rocky road but that`s the way to grow.
EPPERSON: Now, Jegge, who runs her own insurance business in suburban New
Jersey, is in the danger zone. Those last five to ten years before
retirement can make or break your financial future, especially if you leave
your hard-earned money exposed to too much risk.
JEGGE: I`ve always invested at least 30 percent of my money, if not more.
EPPERSON: But an unexpected financial crisis can wreak havoc on
investments. Think about 2008, when the average U.S. worker lost about 24
percent of the balance in their 401(k) account. Even in better times,
market volatility always unpredictable, could seriously damage your nest
Jegge is working closely with financial adviser Jeff Boyer to make changes
to keep her money safe.
JEFF BOYER, REGENT FINANCIAL WEALTH ADVISOR: Putting a retirement plan in
place means making sure clients are going to have a successful financial
plan in good, average, and poor markets. So, essentially, if we`ve got a
financial plan that`s going to work in all those environments, we`ve sort
of taken the market out of the equation.
EPPERSON: Ramping up to retirement, Boyer and other financial advisers
agree it is important for investors to diversify assets. Minimize the tax
impact and maximize Social Security benefits.
BOYER: The dollars at stake between delaying Social Security to age 70 and
accepting it early at 62 can add up to hundreds of thousands of dollars in
EPPERSON: Working longer may also help Jegge avoid getting trapped by the
JEGGE: If I still love what I`m doing and I`m able to do it, I can see
myself working to 70.
EPPERSON: Jegge plans to continue working, saving, and investing to secure
her financial future.
For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.
HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for watching.
MATHISEN: I`m Tyler Mathisen. Happy Easter, everybody. Have a great
weekend. We`ll see you Monday.
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